South Korea Implements Cryptocurrency Regulations for Investor Protection
South Korea has implemented its first major set of cryptocurrency regulations to safeguard investors in the nation. The new framework introduces stringent requirements for Virtual Asset Service Providers (VASPs) under the Protection of Virtual Asset Users (PVAU) mandate. VASPs are now required to hold at least 80% of users’ digital assets in cold storage to enhance security.
Financial Safeguards for Virtual Asset Service Providers
Under the new regulations, the Financial Services Commission (FSC) will designate credible financial institutions to handle fiat deposits made towards VASPs. Additionally, VASPs must segregate customer funds from VASP funds and invest them in “risk-free” assets to generate a yield. These measures ensure that in the event of a cryptocurrency exchange going bankrupt, the respective financial institutions will directly repay customer funds, providing an extra layer of protection.
Real-Time Monitoring System for Abnormal Transactions
The Financial Supervisory Service (FSS) has established a real-time monitoring system in collaboration with cryptocurrency exchanges for constant monitoring of abnormal transactions. This system covers 99.9% of the country’s crypto trading volume and requires exchanges to report any identified abnormalities to the FSS via a dedicated data transmission line. The introduction of this system aims to enhance transparency and security within the cryptocurrency market in South Korea.
